September 2, 2006

Twenty years ago, two friends and I were walking down Broadway through Times Square with our golf bags over our shoulders (we were on our way to the train station to head out to the National Golf Links of America in the Hamptons), attracting -- as you might imagine -- attention and comments, when we paused to watch the old shell game in action on a card table on the sidewalk. Two ladies were repeatedly losing money in the most frustratingly stupid fashion imaginable to the man manipulating the shells. A child could follow which shell the pea was under, but not these ladies (who, oddly enough, bore a striking resemblance to the game's proprietor, almost as if they might be his sisters).

The gentleman running this sporting enterprise noticed my friend John -- who, at 6'5" with flaming red hair and a full set of golf clubs, did tend to stand out from the regular denizens of Times Square -- and invited him to see if he could do better. The game suddenly ratcheted upward in difficulty. Thirty seconds later, John was down $20. Forty seconds later he was down $40. Forty-five seconds later, Bob and I were hauling John bodily down Broadway as he tried to bet the rest of his wallet.

These days, the new Disneyfied Times Square seems to lack that kind of local charm, which must be good for the preservation of Malcolm Gladwell's bank account. The esteemed writer's endearingly naive lack of street smarts about how the world works is on display once again in a new "Comment" in the New Yorker. And then Malcolm, as is his wont, expanded on the lamest bit of his New Yorker essay on his ever-amusing blog. (Of course, if you are a fan of Gladwell, reading his blog is like watching a train wreck in slow motion as he performs on the high wire without editors and factcheckers.)

To illustrate the stupidity of "zero tolerance" rules, Gladwell used this example:

"This past summer, Rhett Bomar, the starting quarterback for the University of Oklahoma Sooners, was cut from the team when he was found to have been “overpaid” (receiving wages for more hours than he worked, with the apparent complicity of his boss) at his job at a car dealership. Even in Oklahoma, people seemed to think that kicking someone off a football team for having cut a few corners on his job made perfect sense. This is the age of zero tolerance."

Now I more or less agree with Malcolm that zero tolerance is a bad idea (and, as I've written, I'm dubious too about NCAA rules about amateurism). But was this the best example of overzealous enforcement he could find? Are starting quarterbacks at football factories really likely to suffer from insufficient tolerance?

Then Gladwell posted a blog entry entitled "Rhett Bomar" to elaborate on his example:

In my "Comment" this week in the New Yorker on zero tolerance policies, I mentioned, in passing, the case of Rhett Bomar. Here are a few more thoughts on his case.

Bomar is--or, rather, was--the starting quarterback for the University of Oklahoma football team. He played last year, as a freshman, and was very good--good enough that people began to think of his team as a national championship contender and Bomar as a potential pro. But this summer he was kicked off the team. His offense? He had a part-time job during last season at a car dealership in town, and he was "overpaid" for his work to the tune of several thousand dollars. Now's he gone. His NFL prospects are up in the air. And Oklahoma is no longer considered a national title contender.

Let's be clear. Oklahama, under the rules, had to do what they did. By being "overpaid" Bomar violated the NCAA's rules on amateurism. His infraction is the kind of thing that gets an entire football program put on probation. But am I wrong, or isn't this whole controversy more than a little nuts?

First, there's Oklahoma. Bomar was one of their best players. He had the ability to put them in line for a national title. Let's say, conservatively, that his presence on that team meant--in additional regular season revenue, TV money, Bowl game revenue and athleticwear sales--many, many millions of dollars.

Then there's the car dealership. They were entirely complicit in "overpaying" him. (Don't you love that word, by the way? It's so quaint! That word hasn't been used, with prejudice, in, oh, at least twenty years). And why? Because having one of the most famous football players in Oklahoma on your car lot is worth a lot of money. It would be as if David Sedaris went back to graduate school at NYU. If you were a bookstore in Greenwich Village, would you "overpay" him to work the cash register? Of course you would. And he'd be worth every penny. But if Sedaris was a football player, and not a writer, that would be illegal. Huh?

To re-cap: Oklahoma made money off Bomar. The car dealership made money off Bomar. Everyone was allowed to make money off Bomar--except, of course, Bomar.

There's a second wrinkle here. Bomar's job was off campus. He entered into a private arrangement with a private-sector employer and was renumerated accordingly. And yet the terms of that private arrangement were sufficient to get him in trouble with the NCAA. Doesn't this make you feel uncomfortable? It's one thing for the NCAA to pass rules concerning the conduct of student-athletes while they are at school. They shouldn't bet on games. They should go to class. They should meet certain entrance requirements. Fine. But isn't it a bit creepy when a organization who's jurisdiction is explicitly athletic starts to tell private citizens how much they are allowed to be paid in jobs they hold on their own time, far away from the athletic field? How on earth do they get away with this?

Ten minutes of Googling should have shown Malcolm that he had completely misinterpreted the nature of Bomar's "job" -- the Big Red car dealership didn't "hire" him as a local celebrity to make more profits like Malcolm imagined. Instead, it was a run-of-the-mill recruiting scam to put cash in a prize recruit's pocket. ESPN reported:

Bomar apparently filed for 40-hour work weeks at a Norman, Okla., auto dealership, making up to $18,000, when he only worked 5 hours a week, Schad reported. The car dealership in question is Big Red Sports/Imports in Norman, Okla., reports Schlabach... The dealership is part of the Sooner Schooner Car Program, which supplies vehicles to coaches and athletic department officials.

The "Big Red" dealership's name is a tribute to the Oklahoma football team's uniform color. They were publicly providing cars to adult officials of the team.

Car dealers might be the most fanatical of all college sports team boosters. Dealers tend to be highly competitive, unburdened by ethics, and can loan fancy cars to recruits without any paper trail for the NCAA to uncover. In Tom Wolfe's I Am Charlotte Simmons, JoJo, the power forward on the Dupont (Duke) national championship basketball team, looks forward to the first day of practice because after he showers and goes back to his locker, there is always a new set of car keys in his pocket -- this year, waiting for him out in the parking lot is one of those ultra-vulgar Cadillac Escalade SUV-pickup combination jobs.

Malcolm is Canadian, so I guess there are a lot of things about America he just doesn't get. Personally, I didn't grasp how American college sports worked either until I was 22 and I shared an office with a former UCLA All-American football player. I asked him why USC kept beating UCLA. He looked me straight in the eye and said with intense seriousness: "Because the USC players know that if they do what it takes to win, they - will - be - rewarded."

But beyond ignorance, Malcolm possesses an invincible innocence that's part of his childlike charm. You may recall that this isn't the first time he's exhibited a faith in car dealers that most Americans would find bizarre in a 43-year-old man.

Gladwell was baffled and offended that both Judge Richard A. Posner, the distinguished leader of the Law and Economics school of thought, and myself had scoffed at his theory in Blink that, as he puts it, the reason "car salesmen quote higher prices to otherwise identical black shoppers is because of unconscious discrimination. They don't realize what they are doing. But buried prejudices are changing their responses in the moment."

Posner and I had pointed out that auto dealers aren't tragic victims of their own hidden bigotry. Instead, they are relying on their years of experience at milking different kinds of customers for the highest possible price.

Thus, they make higher offers to blacks and women because they've found they can often manipulate them into paying more.

David Remnick should realize that it's in the interest of everybody's reputation -- especially Malcolm's -- for him to start providing more adult supervision of Malcolm's brainstorms before Remnick prints them in the New Yorker. Malcolm's a mellifulous writer and he means well, but he has repeatedly shown (as his blog's archives demonstrate) that he lacks bothstreet smarts about how the world works and the inclination and/or ability to perform simple reality checks on ideas that strike his fancy. He is the first victim of his own prose style's ability to seduce and to obscure the truth.

Earlier this week Malcolm melted down over Jane Galt's perfectly reasonable criticism of his New Yorker article claiming Ireland's boom could be explained by legalizing contraception in 1979, bizarrely posting:

"Gladwell" does not attribute Irish success to falling birth rates. David Bloom and David Canning do. Gladwell is a journalist. Bloom and Canning are two exceedingly prestigious economists at Harvard, who are considered world experts in the field of demography and economics. Gladwell was impressed by them. He talked to them. He read their work. He was convinced by them. But he didn't make this argument up on the back of his journalistic notepad. And to neglect the true source of this argument is to trivilize and demean it. This is not Gladwell v. Jane Galt; journalist v. blogger. It's world experts v. blogger. Just so we are clear on this. And acknowledging the origins of this idea means that you can't depose of the dependency ratio argument just by dismissing Gladwell.

The next day, he recovered enough to post a cogent analysis of his credulous shortcomings as a nonfiction writer (although he doesn't actually realize they are failings):

I will confess to having a slightly reverential attitude toward academia. I'm the son of an academic. Much of my writing involves taking academic research and trying to translate it for a more general audience. And I've always believed that if you set out to write about the work of academic specialists, you have a responsibility to treat that work with respect-- to acknowledge your own ignorance and, where appropriate, defer to the greater expertise of others.

I don't always live up to this. And on other occasions, I"m sure, some would say that I take this reverence too far. But that's a criticism I'm more than happy to live with.

I've noticed over the years that while the correlation between general intelligence and being able to write good prose is fairly high, it's not 1.00. All the time I come across people who are clearly smarter than me -- Greg Cochran, Razib, GC, and most of the boys at GNXP, John Hawks, Randall Parker, etc. -- but who are merely good prose stylists rather than very good ones. (If I didn't mention your name, it's a tribute to your writing ability.)

And then there are writers like Malcolm, who are better prose stylists than me, but who seem to lack the criticial urge, the analytical itch needed for assessing whether some new academic paper is the real deal or not. Malcolm's problem is he wants to start translating academicese into New Yorker prose before he's done the reality checks. He's is to academics like the beautiful round-heeled girl who wants to comfort every man who comes along by doing for them what she does best.

The solution is simple. Gladwell needs to work harder, so spend less time on the lecture circuit. He should not start writing so soon in his research, because he no doubt can use his eloquence to persuade himself of the truth of something that would doubtful rendered in more awkward prose.He instead needs to try his ideas out against more skeptical minds than his, people who are expert at shooting holes in trial balloons.

September 1, 2006

In George Orwell's 1984, the Atlantic dictatorship, Oceania, is constantly at war, but its enemy and its ally frequently flip back and forth, due to the exigencies of Realpolitik, between Eastasia and Eurasia. The Ministry of Truth expends much effort getting people to forget that Oceania's eternal enemy of the moment used to be its ever-loyal ally and vice versa: "We have always been at with Eastasia/Eurasia!"

This seems pretty implausible, except for the similarity in names. If the other two other empires were called Russia and China, well, it would be a lot easier to remember the past, but when they are called Eurasia and Eastasia, those little letters between the big "E" and the "asia" part all kind of blend together. I'm reminded of when I had whooping cough in 2002 but I couldn't get doctors to take it seriously because, I fear, they all had this image in their mind of whooping coughs being just about extinct, that scientists had to run around flapping their arms and whooping to get the few remaining whooping coughs excited enough to carry on the species. (Here's a website about how people don't pay much attention to all the letters in a word when reading.)

You might think that the Bush Administration would be embarrassed by its current message that Iran is the world's worst threat considering that Iran was being held in check by Iraq until we overthrew the government of Iraq, but you probably don't understand the public mind as well as Karl Rove.

Like Eastasia/Eurasia and whooping cough/whooping crane, I suspect Karl Rove has done some polls and focus groups on this Iran/Iraq question and discovered that a large fraction of the public can't reliably distinguish between the two. (My wife says that when Iraq invaded Iran in 1980, she was quite confused because she had assumed that Iraq was the capital of Iran, or maybe vice-versa.)

Perhaps a lot of people vaguely assume that "Iran" and "Iraq" are just different spellings for some weirdo Arab word, like how that guy in Libya has three dozen different ways to spell his name, but he's still the same dirtbag. Or how "Muslims" used to be "Moslems" when you were a kid.

I bet Rove's pollsters have found that the 1979-1981 hostage crisis, the 1991 war, the 2003-??? war, the 2003 nuclear bomb scare, the 2006 nuclear bomb scare, Saddam, that used car dealer-looking guy who is in the news all the time, and the Ayatollah's coffin and corpse getting ripped to shreds, all just blend together in the public mind. It's all been the fault of Iranq and we ought to go over to Iranq and kick some Iranqistani butt.

August 31, 2006

The decline of war: A reader points me toward Ohio State professor John Mueller, who occupies the manliest-sounding academic position I've ever heard of: the Woody Hayes Chair of National Security Studies. (Woody was the famous Ohio St. football coach who got canned for punching too many people on the sidelines. One of my most cherished sports-watching memories is the live shot of Woody reacting, poorly, to his team's late turnover in the big game against Michigan. Woody noticed the cameraman recording his agony, turned, and, live on national TV, punched the cameraman in the face. The sight of Woody's fist heading for a point just next to the lens and then the TV camera woozily broadcasting a shot of the sky was totally great. I couldn't find the incident on YouTube, but I did find this later clip of Woody punching an opposing Clemson player, starting a riot, which is what finally got him fired.)

Anyway, Doc Mueller's presumably not some panzy-wanzy pacifist commie symp, at least by the standards of college professors. But, in these days of war fever (over Iran, is it now? Or Iraq? Irap? I can't keep straight which Ira_ country is supposed to be the next Nazi Germany this year...), he's a real spoil-sport. His 2004 book, The Remnants of War, argued:

"War is one of the great themes of human history and now, John Mueller believes, it is clearly declining. Developed nations have generally abandoned it as a way for conducting their relations with other countries, and most current warfare (though not all) is opportunistic predation waged by packs—often remarkably small ones—of criminals and bullies. Thus, argues Mueller, war has been substantially reduced to its remnants—or dregs—and thugs are the residual combatants."

Sailer's Dirt Theory of War: In the past, when thinking about whom to conquer, the key fact was that most of the value of the potential conquest was in the dirt acquired. You could use the ground to raise crops or mine for valuable minerals, which made up two large parts of the economy back in the good old days. War couldn't hurt dirt. Conquering California in the 1840s, for example, did almost zero damage to the place, which turned out, immediately afterwards, to have lots of gold in the ground.

Today, though, most of the asset value of a territory is in the buildings on top of the dirt, which are very easy to blow to smithereens during the course of modern war. And if you don't raze your enemy's cities, they provide formidable makeshift fortresses for conducting resistance to your invasion. So, you just can't win. The expected profit isn't worth your trouble. You might as well stay home.

(Slaves were also an incentive for war, but they aren't too fashionable these days. Who needs them? If you are rich enough to conquer some other country and enslave its people, you are also rich enough to pay the pittance more it would cost to get immigrant indentured servants from a place like Bangladesh. The radical increase in economic inequality in the world over the last couple of centuries has made slavery less profitable.)

Thus, most fighting around the world these days is conducted less like Grant vs. Lee and more like the Corleones rubbing out the rival families at the end of the The Godfather. It's less honorable, but less destructive and more profitable.

2. The Costs of Terrorism Very Often Come Mostly from the Fear and Consequent Reaction (or Overreaction) It Characteristically Inspires

3. The Terrorism Industry Is a Major Part of the Terrorism Problem

4. Policies Designed to Deal With Terrorism Should Focus More on Reducing Fear and Anxiety as Inexpensively as Possible than on Objectively Reducing the Rather Limited Dangers Terrorism Is Likely Actually to Pose

5. Doing Nothing (or at Least Refraining from Overreacting) after a Terrorist Attack Is not Necessarily Unacceptable

6. Despite U.S. Overreaction, the Campaign against Terror Is Generally Going Rather Well

Now, I don't necessarily agree with everything Mueller says (I sound just like somebody writing about me!), but five years after 9/11, this sounds more and more worth considering.

There's a good reason, however, that people worry so much about violence. It's the same reason the New York Times has run so many more front page articles over the last decade about potential epidemics that haven't panned out -- Mad Cow disease, SARS, and avian flu -- than it has run about car crashes, which have killed lots more people. Unlike auto accidents, violence can be contagious.

We are right to worry about violence. One reason that warfare doesn't pay these days is because the U.S. maintains an amazingly vast military establishment (here's a picture of just part of the "Boneyard" at Davis-Monthan Air Force Base in Tucson, where the U.S. mothballs 4,000 disused warplanes, which probably cost tens of billions to build -- in 2006 dollars). We can establish air supremacy just about anywhere on earth, which pretty much means that nobody can conquer anybody without our say-so. Similarly, the 19th Century after Waterloo was more peaceful than people expected because the Britannia ruled the waves.

Eventually, new kinds of weapons may negate our advantage, but in the meantime, it can pay to take a few deep breaths before charging off to the latest war.

Uh oh, I've now noticed that Dr. Mueller has one of those "Germanic surnames" that Dana Milbank warned us about in the Washington Post yesterday, and, judging from Mueller's picture, might possibly be "blue-eyed" too. So forget I ever mentioned him. You can't be too careful these days.

In case you were wondering, "Sailer" is an old, uh, Andaman Islander name and my eyes aren't blue, they're ... cerulean, which is not at all the same thing.

August 30, 2006

Perhaps not absolutely nothing yet, but less and less these days. Civil war will be around for a long time, but invasion and conquest looks less and less sensible, even from a completely amoral national cost-benefit calculus.

Back in the good old days of James K. Polk, starting a cross-border war for lebensraum, minerals, and strategic harbors, such as the Mexican-American War, could be highly profitable, especially, as in the case of Mexican California, when the target was ridiculously underpopulated.

In the 21st Century, however, there just aren't that many such worthwhile targets laying around. Siberia, perhaps, but not too much else.

The lebensraum ("living room" -- yeah, I know, it sounds amusing, but it's not) rationale for war makes sense if you're using all your farmable land and your population is growing faster than the output per acre and you can't trade your manufactured goods for food. Japan fell into this trap when the Depression and rising tariffs choked off international trade, with the per capita consumption of calories by the Japanese falling during the 1930s toward dangerously low levels. Thus, Japan's horrific war in China. Fortunately, all those conditions are unlikely to apply these days.

Minerals, other than oil, just aren't that important economically anymore. And we're spending 50% more on occupying Iraq each year than all the whole country's current oil production is worth at $70 per barrel even if we stole every drop.

Harbors and other strategic spots are still of some value, but the great natural harbor of San Francisco is, oddly enough, less busy these days than the artificial harbor of Los Angeles-Long Beach. Owning stuff like Gibraltar and the Panama Canal just isn't that important anymore.

If you are a high tariff country, it's economically advantageous to bring more territory within your tariff barriers, but tariffs are awfully low these days.

Also, most of the great empires are largely broken up. Most countries are ruled by somebody from, more or less, their own continent and race. Israel is seen as a European intrusion into the Middle East, so it's highly unpopular with its neighbors, but most of the other extra-continental outposts of white rule are gone, like Rhodesia and South Africa, or are dominant, like Canada and Australia.

Of course, there will continue to be fighting that will probably eventually break up some existing countries like Sudan, and there will continue to be civil wars over who controls the machinery of state, but the era of cross-border conquest is probably largely over, except in political and media vacuums like the Congo.

The perceived cost of holding a conquest has skyrocketed. There just aren't that many empty spots on the map anymore, the way the San Francisco Bay Area, perhaps the finest spot for human habitation on earth (and I'm from LA so that's not easy for me to say), was practically empty in 1845.

Moreover, the spread of the idea of nationalism from Europe to the rest of the world, replacing dynasticism as the reigning assumption, means that the kind of easy occupations that, say, the British enjoyed in India for so long just aren't feasible. If the masses assume that who rules them is none of their business, then it's pretty easy for an outsider to take over. But, nowadays, everybody believes that their rulers should be, more or less, from among them.

Further, countries that are advanced enough to enjoy the air supremacy that allows you to conquer another country are generally also so advanced that they don't have the stomach for a massive occupation of a foreign country that's not directly threatening them. To permanently crush a popular insurgency, you have to slaughter a lot of insurgents, and that's hard to do when the victims' relatives have video cameras to show the carnage on television around the world.

Of course, there will be plenty of opportunities to carry on the Great Game of States by other means. But the payoffs from war-by-other-means will be far less than in the days when a few hundred Conquistadors could conquer two empires.

Still, there will be plenty of men who will get very excited over every twist and turn in the Game of Nations, and bay for war to prevent any loss of the slightest advantage. As former war correspondent Fred Reed notes, after decades of following the sounds of guns it occurred to him that war, important as it seems at the time, is just something males do.

Another factor that you do not mention is membership of the EU/EEC and the transfer of funds to Ireland via this route.

Ireland joined the European Economic Community in 1973. For much of that time Ireland has received substantial funds from the EU/EEC. According to this article this amounted to 3% or 4% of GDP.

Naturally Mr Powell, as a member of The Cato Institute, does not believe that an extra 3% to 4% of GDP was the magic that propelled Ireland form rural backwater to Celtic Tiger. But I am certain that it helped. It is easy to make tax cuts if citizens of other countries are paying the taxes instead.

I know that I would not mind personally receiving a boost in my income from a richer neighbor down the road.

Oddly enough for much of that time the UK was the only net financial contributor to the EU/EEC. So Ireland was getting this money from the hated British.

My impression is that the first decade and a half of subsidies just subsidized Ireland's bad habits. Irish politics in Ireland were much like Irish politics in Boston and Chicago: corrupt, but not ideological and not brutal. Interestingly, the Irish boss who launched the free market drive in the late 1980s, Charles Haughey, was notoriously corrupt even by Irish standards, but I guess that's pretty common: see other free market reformers/thieves like Yeltsin in Russia and Salinas in Mexico.

And Angry Bear explains the tax dodge aspect of Ireland's implausibly large GDP per capita:

Well, the worst year of my life was spent at a Big X (at the time, X was equal to 6) accounting firm, doing transfer pricing. Transfer pricing often amounts to little more than highballing the amount of a company’s activity taking place in low tax jurisdictions and lowballing the amount that takes place in a high tax jurisdiction in order to reduce one's overall tax burden. It is often done creatively. Say company X transfers ownership of a logo to the subsidiary of company X in the Caymans. Then, every time company X sells a tennis shoe with that logo, it pays a royalty to its subsidiary in the Caymans. If taxes in the Caymans are lower in the US, X hires E&Y or PWC or whoever to argue that most of the value in the shoe sits in the logo (and therefore is income received by the Cayman subsidiary and thus taxable in the Caymans), and not in the shoe itself (which is income received by the parent company and taxable in the US).

So back to Ireland…. Say you’re a pharmaceutical company. You have hundreds of highly paid researchers scattered throughout the globe – in places like the US, Switzerland, Germany, etc. Because taxes are lower in Ireland than in the rest of these locations, when a blockbuster drug is discovered, it is advantageous to play up the contribution of the researchers in Ireland and play down the part of the researchers made elsewhere.

This has at least two obvious effects. The first is the direct artificial boost to Irish GDP (and an artificial reduction elsewhere). Since Ireland is relatively small, if a crumb is taken from the US, another crumb is taken from Switzerland, etc., the effect can be very large in Ireland. The second effect is indirect – in order to pull this stunt off, it is necessary to have at least some facilities in Ireland, leading to more hiring and building in Ireland as more companies get more heavily invested in playing the game. But its in nobody’s interest to say this is being as a tax dodge, so a mythology springs up (as it did in Argentina), and part of that mythology, at least, is self-sustaining.

This is not to say that Ireland hasn't made a lot of genuine economic progress, just that the statistics claiming it has a per capita GDP 35% higher than the UK aren't telling the whole story

By the way, I wonder how much high IQ labor is wasted annually trying to avoid corporate income taxes or lobbying to get Congress to give firms breaks?

August 29, 2006

The Washington Post's Dana Milbank, who recently denounced Senator Jeff Sessions for reading the Senate's immigration bill and said that he has "harsh twang of a country tough" (i.e., Sen. Sessions is a veritable Ku Klux Klanner) -- is now mad at the distinguished academics Mearsheimer & Walt for writing a paper about the power of the Israel Lobby in Washington. Milbank points out:

Well, consider that during the pro-Israel lobby's annual conference yesterday, a fleet of police cars, sirens wailing, blocked intersections and formed a motorcade to escort buses carrying its conventioneers -- to lunch.

The annual meeting of the American Israel Public Affairs Committee has long produced a massive show of bipartisan pandering, as lawmakers praise the well-financed and well-connected group. But this has been a rough year for AIPAC -- it has dismissed its policy director and another employee while the FBI examines whether they passed classified U.S. information to Israel -- and the organization is eager to show how big it is....

Another fact sheet announced that this is the "largest ever" conference, with its 5,000 participants attending "the largest annual seated dinner in Washington" joined by "more members of Congress than almost any other event, except for a joint session of Congress or a State of the Union address." The group added that its membership "has nearly doubled" over four years to 100,000 and that the National Journal calls it "one of the top four most effective lobbying organizations."

"More," "most," "largest," "top": The superlatives continued, and deliberately. In his speech Sunday, the group's executive director, Howard Kohr, said the "record attendance" at the conference would dispel questions about AIPAC raised by the FBI investigation.

"This is a test, a test of our collective resolve," Kohr said of the "unique challenge" presented by the FBI probe, "and your presence here today sends a message to every adversary of Israel, AIPAC and the Jewish community that we are here, and here to stay." (The official text has two exclamation points after that sentence.) Kohr, without mentioning the fired staffers, told participants that "neither AIPAC nor any of its current employees is or ever has been the target."

Malcolm Gladwell has been promoting the idea of two Harvard economists that Ireland's recent rise to a high per capita GDP was caused in large part by the legalization of birth control in 1979 and the subsequent increase in the ratio of workers to nonworking children in the Irish population (the dependency ratio). Gladwell has been hilariously snippy about anybody disagreeing with him, such as Jane Galt on her Asymmetrical Information blog.

Clearly, there is an inevitable arithmetical sense in which a change in the dependency ratio must affect the per capita GDP, all else being equal. For example, if you'll recall Mrs. Magdaleno, the LA illegal immigrant lady with three children who then took fertility pills and had triplets, followed by quadruplets, her husband's $20,000 annual income laying carpet was originally spread across 5 people for a per capita income of $4,000, but is now spread across 12 for a per capita income of $1,667. In Ireland, the situation changed in the opposite direction.

But the good thing about arithmetic is that you can actually do the arithmetic, and not just wave your hands vaguely in the general direction the arithmetic is pointing, like Gladwell does. And, in the comments on Jane's reply to Gladwell, world class commenter "Tino" (who did such good work attempting to educate Marginal Revolution last spring about immigration), does the math:

In 1987 Ireland had a GDP per capita that was 49% of the US. If this year they suddenly jumped to their 2004 demographic, with the same productivity, their GDP per capita would become 55% of the US. In fact last year it was 90% of the US.

Demography is not much of the Celtic Tigar’s story, the dependency ration explains roughly 15% of the catch-up Ireland experienced. Even if we use the even lower 1970 figure for share of Irish population aged 16-65 demography still only accounts for 20% of the narrowing of the gap to the US.

The rest? Since Ireland has gone through the probably most dramatic laissez faire reform in the west since post WWII Germany the obvious answer is rightwing politics.

Ireland has been the national equivalent of Mr. Magdaleno quickly climbing the ladder from laying carpet for $20k to managing a carpet laying operation for $40k. In the big picture, what mostly drives changes in national per capita income are not changes in the denominator of the number of people (although they do matter) but changes in the numerator caused by the workers becoming more productive and moving up the skill ladder to harder (and thus better paid) jobs.

I suspect that Ireland's spectacular success with tax cutting and the like was a bit of a fluke. New Zealand, another small English-speaking country, tried something somewhat similar and had more mixed results. Some of Ireland's results seem to be caused by multinational corporate accounting exercises to exploit Ireland's low corporate income tax rates.

I also imagine that there was a big cultural change that boosted the economy. After Ireland gained independence, it turned its back on the modern world, as represented by England, and just wanted to be Irish -- clerical, conservative, rural, and backward, kind of like Franco's Spain. Compared to all the horrible things that were happening in other European countries that tried to be modern in the 1920s through 1940s, Ireland's quietism was pretty successful. Political violence in the Republic of Ireland tapered off to nonexistent, and people went about their lives in peace. But being peaceful and poor gets old after awhile, so it was about time for Ireland to catch up.

Even as much as peak oil fear mongers try to paint a picture of shortages, there are other sources of gasoline and diesel fuel and so the Middle-East has limited control over the price of petroleum. We use so much oil because it is so cheap and we use so much Middle-East petroleum because it is cheaper than fuel from other sources. As the price of petroleum rises more and more of the Canadian tar sands become more profitable, Gas-To-Liquid is already profitable (much of this is in the Middle East but Russia could also start producing GTL) then at a little higher price coal to liquids becomes profitable then at a still higher price bitumen from Latin America, then at a higher price than that shale oil can be used. There is also deep water drilling.

On the other side, for a few hundred bucks cars can be made to get better mileage. Then at some price for fuel people will drive smaller cars. Hybrids are already better, quieter cars but at some point they become economical. The mileage that long hall trucks get has doubled since the 1970’s (from 3.5 mpg to about 7mpg) and the technology exists to double it again to about 14 mpg.

Why do we in the west not have so little confidence that our system will continue to leave countries like Iran in the dust? Why do not believe that they will continue to fall behind as long as they pay people to not work? This is even if the petroleum prices rise? Sharp petroleum price rises can make them some gains but Amedinejad got elected by promising to give more of the petroleum revenue to the people, not to the people who pump the petroleum but to all the people. I would not worry about him.

BTW the Middle-East petroleum exporting countries need the petroleum revenue much more than the west needs the petroleum. Don’t let the politicians convince you that it is otherwise. And I quote:

“The whole aim of practical politics is to keep the populace alarmed – and thus clamorous to be led to safety -- by menacing it with an endless series of hobgoblins, all of them imaginary." -- H.L. Mencken

Leave the Iranians alone and they continue to fall behind. If they ever get a nuclear weapon and use it they will all be dead, and if they don’t, they will change or continue to fall behind.

The author of "Blink" gets paid, last I heard, $250,000 per year to write 40,000-50,000 words annually for The New Yorker, or $5 or $6 per word. So, it's a testament to the power of fashion that he has started his own blog. Sensibly, he doesn't update it often. But when he does, it's frequently because he is offended that somebody has dared to dispute any aspect of his latest New Yorker article. For displays of wounded amour propre, Gladwell's blog is getting awfully amusing. Here's his latest:

"One of my frustrations with the blogosphere--as those of you who read this blog know--is that I think that the immediacy of web publishing makes some people lazy. They type faster than they think; or they believe that a reaction is the same thing as an argument.

Speaking of "typing faster than they think," as you read what follows, see if don't you suspect Gladwell himself would have been better advised to take a few deep breaths and not click on "Post?" Maybe first sleep on it overnight? In the blogging business, you don't have all the editors and fact-checkers that make New Yorker writers look good. Gladwell goes on:

"Case in point. The blogger known as Jane Galt had the following criticisms of my "Risk Pool" piece:

'For starters, [Gladwell] attributes Ireland's success as the "Celtic Tiger" to falling birthrates, which (temporarily) reduced the dependancy ratio. He utterly ignores a more parsimonious explanation, which is that Ireland slashed its marginal tax rates in 1987, including a cut in the corporate income tax to 10%, which turned it into Europe's first outsourcing destination. If you look at the handy spreadsheet I have uploaded, containing data on Irish growth from 1980-2005 obtained from the invaluable Economist Intelligence Unit, you will see that this fits the Celtic Tiger period much better than a 1979 relaxation of birth control restrictions. Moreover, since there is much evidence that economic growth causes falling birthrates by raising the opportunity cost of childrearing, even if there were a correlation it would be hard to say which way it ran. This also applies to his arguments about Asia and Africa.'

"Where to start? Let's ignore, for the moment, the quaint right-wing affectation of assuming that marginal tax rates are the most "parsimonius" explanation for all variety of complex human behaviors. Instead, let me make two small points.

"1. "Gladwell" does not attribute Irish success to falling birth rates. David Bloom and David Canning do. Gladwell is a journalist. Bloom and Canning are two exceedingly prestigious economists at Harvard, who are considered world experts in the field of demography and economics. Gladwell was impressed by them. He talked to them. He read their work. He was convinced by them. But he didn't make this argument up on the back of his journalistic notepad. And to neglect the true source of this argument is to trivilize and demean it. This is not Gladwell v. Jane Galt; journalist v. blogger. It's world experts v. blogger. Just so we are clear on this. And acknowledging the origins of this idea means that you can't depose of the dependency ratio argument just by dismissing Gladwell. You may actually have to read Canning and Bloom.

"2. Galt says that Gladwell neglects a more parsimonious explanation: Ireland's tax cuts. As we've seen, Gladwell did no such thing, because Gladwell didn't do an analysis of Ireland's economic growth. What about Bloom and Canning? Did they neglect the larger economic picture? Well, actually, no. In the "Celtic Tiger" paper, they construct a complex mathematical model to try and tease out the various factors that led to the Celtic miracle. They think that the opening up of Ireland's economy in the 1970's was very important. But the data, they argue, also suggest that the country's demographic transition played an important role as well. Bloom and Canning, apparently, are of the view that sometimes things that happen in the world happen for more than one reason.

"All of this information is quite readily available in the "Celtic Tiger" paper, which is in turn quite readily available on a marvelous invention called the world wide web. The paper itself is just under twenty pages long. It can be read in under half an hour. It's not that hard. Trust Gladwell on this one.

Was Gladwell always so prone to go into a snit like this? Or is giving speeches for $60,000 a pop and having everybody tell you they read your book on the airplane and you're a genius bad for the soul?

To be accurate, Jane Galt (whose day job is reporter for The Economist) called him "Mr. Gladwell" the three times she mentioned his name in a long post (and presumably not in the Mr. Blackwell-sense that I suggest above), so I have no idea what set off this flurry of references to himself in the third person.

Galt responds in "Malcolm Gladwell hates me" that she did read the paper and disagrees with it for some cogent reasons that she makes at length.

Gladwell's article is 4,825 words long, which means he got paid about $25,000 for it. For that kind of money, yes, I expect him to read a 20 page academic paper. I also expect him to read more than one paper. I also expect him to run some reality checks on the original paper's theory, as I did for him a couple of days ago, rather than just credulously pass it on.

August 28, 2006

A reader who knows a lot more about Middle Eastern foreign policy than I do writes:

Iran doesn't want and isn't planning to invade any country or even part of a country. It wants to become the regional "hegemon" in the Persian Gulf -- like the U.S. in this hemisphere or China in East Asia (which is China's long term goal) and Russia in the "near abroad" -- a role that a counterbalancing Iraq has prevented it from playing for many years.

Now thanks to the ousting of Saddam (and the Taliban in Afghanistan) Iran is able to reassert itself especially through the assistance of Shiite players in Iraq (and Afghanistan) and elsewhere. So we are not talking about the use of military power to occupy lands but more to affect decisionmaking in its neighborhood. Zbigniew Brzezinski described once what it means to be a "hegemon." It means that if the leaders of country X plan to pursue a certain policy the first question on their mind would be: How will the hegemon respond? I think that Iran, especially if it gains control of nuclear military power, will be able to achieve this goal and turn Iraq (or what's left of it), Saudi Arabia and the other Gulf states into its satellites.

You seem to play down the power of the Shiite revival as a major political asset for the Iranians (See Vali Nasr's important article in Foreign Affairs.) You write: "The basic problem, as far as I can tell, is that Arab and Persian Shiites are Arabs and Persians. They speak different languages, have different cultures outside of religion, and have different relatives." Arab nationalism is dead and there is certainly no "Iraqi" nationalism. So as Nasr and others (including moi) have pointed out: Shiite identity has become now a powerful force that can strengthen Iran's hands (in the same way that Pan-Slavism was a major asset for the Russians). As Nasr documents, some top figures in the Iranian leadership are actually Iraqis and vice versa; some of the "Iraqi" leaders are actually Iranians.

So ... things looks quite good for Iran these days and they've been very smart and cautious in pursuing their diplomacy. In fact, their major mistake will be to use their military power to attack anyone in the region. Like China in East Asia they just have to wait for the Americans and their allies to continue making their mistakes.

Now... I'm not proposing that the U.S. should therefore attack Iran but that it should try to do a Nixon-goes-to-China with them based on Realpolitik considerations.

Thanks. The big question then is what are the costs to America of Iran being a regional hegemon. For example, can they use this influence to drive up the cost of oil on the global market? Can they then turn higher oil revenues into a perpetual motion machine where increased oil revenue is turned into weapons or less violent foreign influence, which drives up the price of oil higher?

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